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Instant Technology, LLC v. Defazio

United States District Court, Seventh Circuit

November 8, 2013

INSTANT TECHNOLOGY, LLC, an Illinois Limited Liability Company, Plaintiff,
ELIZABETH DEFAZIO, et al. Defendants.



For the following reasons, Defendants' Emergency Motion for Protective Order and Sanctions (Defs.' Mot.) [dkt 179] is granted as further set out herein.


A. The Confidentiality Order

Plaintiff Instant Technology, LLC ("Instant") is an information technology staffing firm. (Am. Compl. ¶ 2.) [Dkt 40.] Instant's complaint in this case alleges that in late 2011, Instant's former executive vice president Elizabeth DeFazio induced Instant employees Laura Rehn, Megan Marker, Bethany Meek, and Erin Bauer to leave Instant, steal Instant's confidential information, and start a new information technology staffing company called Connect Search, LLC, along with staffing industry veterans Joel and Andrea Katz. ( Id. at 51-81.) Supervision of discovery was referred to this court. [Dkt 51.]

This has been a highly contentious litigation between competitors, as illustrated by the fact that Instant has filed four motions for a temporary restraining order or preliminary injunction, claiming, inter alia, that defendants are using Instant's confidential information to compete unfairly. [Dkt 4, 27, 83, 173.] In the course of discovery, pursuant to Fed.R.Civ.P. 26(c), an Agreed Confidentiality Order was entered permitting a party to designate certain classes of sensitive documents as "CONFIDENTIAL-SUBJECT TO PROTECTIVE ORDER" or "CONFIDENTIAL-OUTSIDE COUNSEL ONLY." (Agreed Confidentiality Order ¶¶ 2-3.) [Dkt 102.] The latter designation is only for those documents that contain "highly sensitive information" that "would tend to cause substantial harm to the designating party's legitimate business, competitive position or privacy interests." ( Id. ¶ 3.) Documents designated as "subject to protective order" may only be shared with certain persons such as the parties, the court, and experts, but - importantly for this motion - documents carrying the "Outside Counsel Only" designation may not be shared with the parties. ( Id. ¶ 6.)

The Confidentiality Order provides a method for challenging a designation: counsel for the parties must meet and confer to discuss the challenged designation, and if no agreement can be reached, the designation is to be challenged by motion. ( Id. ¶ 11.) Until the court rules on the propriety of the designation "all parties shall continue to treat the materials" as confidential. ( Id. ) The agreement further mandates that "[a]ny party wishing to file a document designated as Confidential Information in connection with a motion... must comply with Local Rule 26.2." ( Id. ¶ 9.) That rule provides that a party must provisionally file the document under seal and "move the court for leave to file the document under seal." L.R. 26.2(c).

B. Instant's Motion, Memorandum and Confidential Exhibits

On Thursday, May 23, 2013, the parties appeared before the District Judge on Instant's motion for leave to file a memorandum in excess of 15 pages in support of Instant's most recent motion for preliminary injunction. [Dkt 169.] Instant attached its proposed memorandum to that motion, but without exhibits. ( Id., Ex. A.) The District Judge granted Instant leave to file its motion and memorandum that day, and Instant filed the motion for preliminary injunction with the accompanying memorandum and exhibits. [Dkt 172, 173, 176.]

On Wednesday, May 29, at 3:47 P.M., defendants' counsel notified Instant's counsel via email that documents designated "Confidential - Outside Counsel Only" containing Connect Search's highly sensitive financial information had been filed in the public record as exhibits to Instant's memorandum. (Defs.' Mot., Ex. A.) That email was sent to two attorneys with appearances on record for Instant: David Ritter and Austin Burke. ( Id. ) Defendants' counsel requested that Instant's counsel "[p]lease take whatever steps are necessary to remove these documents from the court's file." ( Id. ) A day later, May 30, at 1:37 P.M., Instant's counsel Burke responded with a one-sentence email stating, "Please let us know which financial information, specifically, you believe should be removed from the court's file so we might redact the documents in question appropriately." ( Id., Ex. B.) About two hours later, defendants' counsel responded with a list of documents that should be removed and added, "These documents need to be removed from the court record immediately." ( Id., Ex. C.) Instant's counsel Burke replied with another one-sentence email asking, "What information in these documents do you believe to be confidential?" ( Id., Ex. D.)

On Friday afternoon, May 31, at 3:51 P.M., defendants' counsel notified Instant's counsel Burke (with a copy to attorney Ritter) that, in defendants' view, Instant had violated the Confidentiality Order. ( Id., Ex. E.) Defendants' counsel once again asked that the documents be removed, and requested that other documents marked as "Confidential - Subject to the Protective Order" that had been filed as exhibits to Instant's motion also be removed. ( Id. ) He added, "If you do not address this immediately, we will raise the issue with the court." ( Id. )

Instant's counsel Ritter has submitted a declaration stating that a paralegal in his office first attempted to contact the office of the Clerk of the Court on Monday, June 3, but it was not until Tuesday, June 4, that the paralegal spoke with the clerk's office. (Pl.'s Resp., Ex. 1, Decl. David Ritter ¶ 11.) [Dkt 186.] He does not explain why the paralegal was not able to reach the clerk's office on Monday. When Instant's paralegal explained the situation, "the clerk promptly corrected the docket and sealed all exhibits containing Confidential' designations." ( Id. at ¶ 12.)

At about noon on June 4, Instant's counsel Burke informed defendants' counsel about the removal of the documents from the public docket. (Defs.' Mot., Ex. F.) Later that day, defendants' counsel emailed Instant's counsel Burke (with a copy to Instant's attorney Ritter) asking him to "confirm whether or not the attachments that were designated Confidential - Outside Counsel Only' by Defendants were provided to your client." ( Id., Ex. G.) Receiving no response, on June 5, defendants filed the present emergency motion requesting that Instant's counsel be compelled to disclose whether anyone at Instant had been given the confidential documents and asking for an award of defendants' attorneys' fees incurred in bringing the motion. (Defs.' Mot. at 5.)

On June 6, Instant's counsel Ritter sent an email stating that he confirmed that the documents had not been sent to his client and that "the only people who have seen or have had access to them have been attorneys and staff in my office." (Pl.'s Resp., Ex. 2.) Attorney Ritter's declaration states that he was traveling on business on June 4 and did not have an opportunity to check his records and respond immediately to the June 4 message. (Ritter Decl. ¶ ...

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